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Payday Loan Military - In this June 10, 2015 file photo, a chip credit card is seen in Philadelphia. Exploring the basics of a credit score can give you a fresh start this year and help you figure out how best to build and defend it. (AP Photo/Matt Rourke)

Service members and veterans should be wary of new types of loan-like products that have emerged in recent years, particularly "paycheck advance" products and revenue sharing agreements.

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One problem for service members and veterans is that current legal protections may not cover these new "products." For example, the Lending Act provides service members with low interest rates on most types of consumer loans, and since its enactment in 2006, it has been documented as successfully reducing the use of payday loans by servicers. But does this apply to the new "products" that have appeared in recent years?

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The term "credit" has a technical meaning. The federal Truth in Lending Act (TILA) defines "credit" as the right granted by a "creditor" "to defer the payment of a debt or to assume a debt and defer its payment." A "lender" is someone who regularly issues a loan that can be repaid in more than four installments or with a "finance charge". Once a product is recognized as "credit," important federal protections, such as fee disclosure, are triggered.

But there are some new products that may not be covered by the law, and service members, veterans, families and survivors should watch out for:

Paycheck advance products like Earnin allow people to borrow up to $400, which can often be paid back over a short period of time, often less than a month. The company uses an ACH debit authorization to withdraw money from the borrower's bank account within the specified time period. Instead of charging, Earnin asks for tips.

"I really didn't think about the repayment period and the interest," Georgia Southern University student Nisha Beal told NBC News after realizing her "tip" was 130% of the loan's interest. "They just present it as very simple and very easy."

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Does current legal protection cover this new idea? The Truth in Lending Act's definition of "finance charge" does not apply to tips, which Earnin says differentiates its paycheck advance product from payday lenders.

Is the company right? Some legal scholars interpret the terms to mean that payday advance products are not "loans," suggesting that the legal protections provided by the Truth in Lending Act may not apply. But other knowledgeable legal scholars believe that payday advance products appear to qualify as credit under the Consumer Financial Protection Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, and the Fair Debt Collection Practices Act.

We strongly recommend that veterans, service members, families and survivors stick with traditional federal student loans that are protected by the federal government.

We urge you to be careful with student loan alternatives, especially "Revenue Sharing Agreements." Income Sharing Agreements (ISAs) are offered as an alternative to student loans, as the "lender" provides money to the "borrower" to cover tuition and/or living expenses. This allows a student to attend a class without paying anything, but upon graduation they must return a percentage of their future earnings to the school. This type of arrangement may seem particularly attractive to students from historically marginalized communities who may have more limited access to traditional means of financing higher education.

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Not paying upfront for school may seem like a good deal, but the bottom line is that ISAs can be more expensive than traditional student loans if you end up earning more or less than you expect. The contract may state that if you get your degree and can't get a good job, you owe little or nothing. But hidden pitfalls can still make ISAs unaffordable – people can have ISAs on top of traditional student loans, and ISAs can require higher payments than federal income-based payment programs. If you make a lot of money, the price can be steep. Even worse, there can be a large hidden prepayment penalty.

One would think that this would motivate schools using ISAs to provide a high quality education to ensure that the student has a high income, but this may not be the case. For example, our organization has received complaints from student veterans about Lambda, a California IT school that relies primarily on revenue-sharing agreements:

Lambda's website says, "Our ISA is an investment in you," and "Lambda School is only profitable if you get a job earning $50,000 or more." Another Lambda website states that "we only succeed when you do."

The veteran we helped found these to be empty promises. He found a disorganized program that barely taught students basic technology skills. Those problems prompted him to do some research, and he found that California had previously ordered Lambda to stop enrolling students. He and other students wanted to get rid of their ISAs. Eventually, enough students complained that Lambda was cheating them by making promises it didn't keep, and Lambda offered students to give up their ISAs and the option of arbitration.

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One Lambda student admitted to ISA had difficulty getting accepted into IT programs at other schools. According to the students, some students who pursued their grievances against the school found that they were opposed and lost. The success of veterans' education implored the state of California to act on behalf of the students. Lambda later agreed to change its ISAs to retail installment agreements to comply with state law.

Does the law protect you if you agree to an income share agreement? Opinions differ on whether an ISA is a "loan" under federal law or not. Currently, ISAs may not give you the same rights and protections as federal student loans (for example, the right to get loan forgiveness if you're severely disabled or your school cheated on you). We urge the Consumer Financial Protection Bureau (CFPB) to take a closer look at these contracts and issue regulatory guidance on ISAs before too many students start school using these products without fully understanding their implications.

Veterans, service members and families should try to avoid private student loans. My organization, Veterans Education Success, always recommends that student veterans should look to federal loans first if they need to take out student loans, and our staff is here to help. Until legislation is reached, service members and veterans should look to these new alternatives to federal student loans. Unfortunately, there are too many companies out there to rip off a veteran.

More education equals more federal pay Earning a degree can increase your earnings, especially when it comes to getting a federal job.

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